Eritrea works to lure business back to war-battered port

AFP, March 24, 2008

MASSAWA: It’s been a long time since the old bank in Eritrea’s main Red Sea port had a customer. Like much of the ancient city of Massawa, it was devastated by heavy Ethiopian bombing raids during its liberation in 1990 by Eritrean guerrilla fighters.
Today, hungry cats prowl the once elegant colonial-era building, ornate plasterwork lies in piles of rubble and the bank’s thick vault door hangs inches open - rusted solid, with only spider webs visible in its tantalisingly inaccessible gloom.
But towering above its bullet-pocked and crumbling facade tall cranes turn slowly as they heave up containers from a boat onto the dock.
The cranes are new, part of ambitious plans to revitalise the steamy port - once one of the busiest in east Africa - by declaring a 1,100 hectare (2,717 acre) free trade zone to attract investment and boost Eritrea’s tightly controlled economy.
“We believe it can be an engine to transform Eritrea’s economy,” said Araia Tseggai, chief executive of the Eritrean Free Zones Authority.
“It will help develop an internationally competitive business sector,” Araia added, stressing its position, “ideally sited” on the busy shipping route between the Middle East, Asia and Europe.
The free zone is planned to include warehousing facilities, manufacturing and assembly plants, commercial trading and services for shipping.
State media boasts that half a billion nakfa ($33mn) has already been spent. A new airport has been constructed, roads upgraded, a lavish sea-front hotel near completion and an army of national service conscripts drafted in to toil on the construction of rows of apartment blocks.
“A country can’t attract investment without infrastructure,” Eritrean President Issaias Afeworki said during a recent interview published by the state media.
“By putting in place very good infrastructure and service for handling... that could be an opportunity for regional and global markets.”
But it’s a tough task to revitalise Massawa’s economy, with industry and trade stifled by a long-running border deadlock with arch-foe Ethiopia.
Analysts continue to warn of a potential return to hostilities following a 1998-2000 border war. Some quarter of million troops face each other across no-man’s land, with tensions raised after UN peacekeepers pulled out of border zones this month after Eritrea cut their fuel supply.
“It’s a ghost town,” said one elderly port worker, wearily waving a stick at a dozen scrawny cats begging for fish scraps. He pointed to the once busy bars, now largely empty with the young conscripted into a giant national service programme, and bar workers rounded up and sent for tough military training in the hot surrounding desert. “It’s not like the old days,” he added.
State media say that at least ten companies have received licenses to start businesses, optimistically predicting that “many more” will apply.
The zones are a rare chance for private enterprise in Eritrea, whose restrictive foreign currency regulations, hostile diplomacy towards several Western nations and tough import restrictions have deterred outside investors.
But the government has promised that foreign companies will be exempt from import and export taxes, and, crucially, will be allowed to take profits out of the free zone.
“We have high hopes, and there are dozens of companies already interested,” Araia added, saying the zone will be expanded.
Companies from China, several Gulf states, Italy, Israel and Sudan are among those considering setting up, he added.
But competition is stiff for late-starting Massawa, with well-established regional rivals including neighbouring Port Sudan, Djibouti, and the Yemeni port of Aden, all themselves dwarfed by Dubai.
Djibouti enjoyed a massive trade boom when it became the main port for landlocked Ethiopia, which switched its business to the city-state after the border with Eritrea was closed with the outbreak of war in 1998.
Yet the government says it is determined to rebuild the city, which spreads from the mainland via long causeways across to two islands, where the main docks are based.
“We are a young nation and we have inherited a legacy of a devastated country,” said Issaias, who is himself now based much of the time in the port, 103km east of the mountain capital Asmara.
Once dubbed the “pearl of the Red Sea” for its Arab and Turkish influenced architecture, many of Massawa’s estimated 35,000 inhabitants live in simple huts patched with metal sheets and ragged cloth.
With sweltering temperatures soaring well above 40 Celsius for many months of the year, it’s a tough place to live.
The government enthusiastically hopes to boost Massawa’s fishing industry to improve food security as part of its fierce policy of self-reliance that includes the rejection of foreign food aid handouts.
But without positive change on the border stand-off with Ethiopia - with many fearing their far larger neighbour still hungers for its lost Red Sea ports - many ambitions will remain only a dream.
“We can make every effort, but until the problem with Ethiopia is solved we cannot progress far,” said one Massawa businessman, sipping tea in a bar looking out across the sparkling water to the bombed ruins of former Ethiopian emperor Haile Selassie’s palace.
“If war breaks out again, then all we have tried to achieve could just be lost again.”